I am 74 and must make a IRA RMD of $2,756 ... the 50% penalty is $1,378 for NOT taking this RMD before end of 2016, correct?

[fanfare]

In his situation tax should be zero, with or without the RMD in 2016.

[SweetieJean]

Aren't IRA distributions/conversions taxed at ordinary income rates, not capital gains rates?  More of your Social Security may become taxable,.  Also remember potentially increased Medicare premiums two years down the road.
<a rel="nofollow" target="_blank" href="https://www.ssa.gov/pubs/EN-05-10536.pdf">https://www.ssa.gov/pubs/EN-05-10536.pdf</a>

[dmertz]

At a current value of about $6559 and no other income other than Social Security, neither of these side effects is likely, but should be checked.

[SweetieJean]

How do you know the current value is $6,559?  I didn't see it mentioned above.  If the RMD is $2756, then the current value would be miore like $65,593.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf">https://www.irs.gov/pub/irs-tege/uniform_rmd...>

[dmertz]

It's the December 31, 2015 value that was $65,593.  I thought that the entire 90% drop in value occurred during 2016, but reading the question again I see that this drop occurred over two years, not one, so my calculation was erroneous.  A higher current balance than I thought does make it more likely that distributions from the traditional IRA may need to be limited to avoid possible additional taxation of Social Security benefits and increase in Medicare premiums.  The tradeoffs are difficult to model.

[SweetieJean]

I agree. OP also says "taking the RMD of $2,756 right now would cost me $23,476 in lost capital "

[dmertz]

That's based on the assumption that the stock valued at $2,756 now will appreciate by about 850%.  That whole portion of the discussion is probably moot, though, since the distribution can be made in-kind and any appreciation can still be realized.  As fanfare suggested, if distributed in-kind and subsequently held for more than a year, the $23,476 of appreciation would eventually be taxed as a long-term capital-gain instead of as ordinary income.  Paying tax on $23,476 of LTCG will likely save at least 10% over having it taxed as ordinary income.  Regardless of which way the $23,476 is realized, it will have the same effect on the cost of Medicare premiums and the taxability of Social Security.

[TomD8]

This situation illustrates the hazards of investing an entire retirement account in a single stock.  A 90% loss would have been a near impossibility with a more diversified portfolio.

[fanfare]

Living, as stated, on Social Security only, an RMD of 2,756 is not enough to trigger taxation.
Therefore the entire RMD can be reinvested into the stock, if that is what is desired.

Please let us know what stock goes up in April, so we can get some!

[fanfare]

For it to work you have to be able to take an RMD with 0% Federal withholding.